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Joe Eqcome

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  • CEFs Reverse Course: Risk Avoidance Tops the Week [View article]
    bsharvy

    As it relates to owning Berkshire through BIF--which represents 30% of the equity holdings, even if you valued the other 70% of its portfolio at par, you would have a 3.3 year breakeven at a 2% annual management fee before the current discount was consumed by the cumulative fee. (22% discount/((2% fee/30% Berkshire portfolio holdings)). Since Warren Buffett is a full professor in the investment business, I'd be willing to give him the courtesy of waiting at least 12 months prior to bailing.

    Joe Eqcome


    On May 18 12:50 PM bsharvy wrote:

    > A CEF isn't legally required to make distributions; if it is willing
    > to pay taxes, it can keep and reinvest the income.
    >
    > The problem with BIF and BTF is that the fees are high. You are paying
    > over 2% a year for the ability to own Berkshire in small amounts.
    May 18 03:00 PM | Likes Like |Link to Comment
  • CEFs Reverse Course: Risk Avoidance Tops the Week [View article]
    bsharvy

    Yes, you're technically correct, but I believe there is a limited number of circumstances where it would be justified. No one buys a conduit like a CEF so its management can retain earnings minus taxes to be reinvested. There are operating companies for that purpose which have greater flexibility of operation.

    Joe Eqcome

    On May 18 12:50 PM bsharvy wrote:

    > A CEF isn't legally required to make distributions; if it is willing
    > to pay taxes, it can keep and reinvest the income.
    >
    > The problem with BIF and BTF is that the fees are high. You are paying
    > over 2% a year for the ability to own Berkshire in small amounts.
    May 18 01:17 PM | 3 Likes Like |Link to Comment
  • CEFs Reverse Course: Risk Avoidance Tops the Week [View article]
    User 415504

    There are several reasons why a CEF, which is legally required to distribute annually its earnings and realized capital gains, would not:

    1. It has no earnings and profits (E&P);
    2. It utilizes its loss carry forwards to off-set earnings and profits;
    3. It is precluded from distribution due to a leverage ratio that exceeds regulatory requirements.

    A rising stock market has several of the elements that would enable BIF to reinstate its distribution.

    In the last 5 fiscal years, BIF has generated investment income. In FY ’08 it did recognized capital losses. BIF’s accumulated net losses are minimal, so any earnings would be likely to be subject to distribution. (While I’m not an accountant and recognize I’m on “thin ice” here, in theory, management could continue to absorb earnings by selectively recognizing losses and therefore postpone distributions.)

    To the extent that distributions are a function of regulatory restrictions, rising stock markets and alternative financing of ARPS would mitigate that hurtle.

    Lastly, there are those that suspect that the distribution reduction was a ruse to allow the insiders to accumulate their positions at vastly reduced share prices. And that management of BIF would reinstate the dividend to enhance the value of their shareholdings as well as generate incremental return on investment.

    While I can not provide a smoking gun with regards to specific legal requirement for such distributions by calendar year end, I believe there’s enough circumstantial evidence for its reinstatement. Loosely translated, I’m speculating on a distribution reinstatement.

    Joe Eqcome
    May 18 09:48 AM | 2 Likes Like |Link to Comment
  • Are ETFs and CEFs Good for Dividend Investing? [View article]
    starvin sargent

    Thanks for your comments.

    My sector allocation is the product of the industry model I developed and is based on adjusted historical performance of fund types during different phases of the economic cycle. In late/early economic phases, the fixed income does well as typically interest rates decline. This is usually followed by a rotation through the equity fund types. Of course each cycle is different. During the current cycle, credit issues became a impediment to the fixed income fund types initial advance. This was particularly true of the preferred fund typds

    As it relates to the CEF analytical process, the investment algorithm I use is order of importance is: 1) Consistent high returns on NAV; 2) Abnormally large discounts for NAV (price, historical average, fund or sector type); 3) fund type or sector momentum (relative strength); 4) reasonable and sustainable distribution policy (investment income as a percent of distribution); 5) reasonable expense ratio; 6) insider ownership; 7) asset size and trading liquidity. That is the criteria for the ratings.

    I hope this is helpful.

    Joe Eqcome



    On May 09 09:21 AM starvin sargent wrote:

    > Hey Joe, Why BLV? Have you considered other CEF bond funds? Are their
    > any that meet your criteria? For me something like FOF where there
    > are so many funds bundled together to spread risk or HTR that uses
    > leverage on a bond portfolio seem to have more potential. Also TYG
    > that captures the divys from energy is good for that steady inflation
    > protected return. Although with all CEF's deleveraging HF's will
    > drive the share price very badly, just look at ETO or FOF for that!
    > Finally please write up your allocation to these instuments and sell
    > and buy rules, thansk for your work
    May 11 01:49 PM | Likes Like |Link to Comment
  • CEF Week in Review: Riskier Fund Types Rule [View article]
    Sskell

    If BIF's management is as cynical as you believe—and I believe there may be evidence they are—wouldn’t those that invested now prior to the reinstatement of the dividend be a net beneficiary of that future policy?

    My long term investment policy (12 months or more) criteria are: 1) Do I trust management? 2) Can management make me money? 3) Never reverse the order of "1" and "2".

    For short-term trade of 6 to 9 months—as I see this opportunity, I’ll occasionally make an exception to that policy if the story's compelling. The fact I’ll need to take a soapy, hot shower post investment notwithstanding

    Anyhow, it will be interesting to see how this plays out.

    Joe Eqcome


    On May 10 09:58 PM sskell wrote:

    > Isn't this pretty straightforward: they knew that if they eliminated
    > the distribution the share price would collapse, allowing them to
    > buy it a lot cheaper. They can reinstate the distribution anytime;
    > if I were as cyncial as these guys seem, I'd even raise it from its
    > previous level to suck in all the retail investors that love a big
    > distribution yield regardless of its source or sustainability.
    May 11 12:42 PM | 3 Likes Like |Link to Comment
  • CEF Week in Review: Riskier Fund Types Rule [View article]
    Alan Young

    My mention of the best and worst performer in the weekly commentary is only designed as a data point and I hope they're not being taken as recommendations. It is designed to see what's moving and to facilitate further inquiry and hopefully drawn some conclusions.

    You're correct in the fact that there are probably better plays on commodities and the recovery of those commodity driven economies such as Russia than Templeton Russia & Eastern Europe Fund (TRF). Other CEF alternatives that touch on Russia are: Central Europe and Russia Fund (CEE) and Morgan Stanley Eastern Europe Fund (RNE) both trading at discounts.

    Thanks for you kind word on BIF.

    Joe Eqcome


    On May 10 04:33 PM Alan Young wrote:

    > Joe, your analysis of BIF is superb. More comprehensive detail and
    > less axe-grinding than I've seen in similar articles. Well done.
    >
    >
    > About TRF: The bullish commodity market explains why Russia-oriented
    > funds would go up, but not why they would trade at a 59% premium!
    > There are easier ways to own Russia. This warrants further investigation.
    May 11 12:19 PM | 1 Like Like |Link to Comment
  • CEF Week in Review: Riskier Fund Types Rule [View article]
    Oldman

    Since the CEF market segment is so diverse, I believe that by looking at the trends in the sub-sector an investor can get a better understanding of the larger investment picture.

    Based upon the mosaic theory of investing, by touching all parts of the elephant you can get a better understanding of its size and composition. This CEF sub-sector trend analysis is just one of those component parts.

    Additionally, I try to mix up the weekly commentary by sometimes looking at the weekly and other times reviewing the month or YTD.

    This maybe useful to some and to others it may be of little value. Ultimately, the marketplace will decide.

    Joe Eqcome




    On May 10 11:25 AM oldman wrote:

    > you are making the mistake of an inexperience investor by using short
    > term and rear view mirror performance. I'm surprised someone with
    > your experience would make this comparison.
    May 11 11:59 AM | 1 Like Like |Link to Comment
  • Are ETFs and CEFs Good for Dividend Investing? [View article]
    Steve20423

    I maintain a website that focuses on CEFs that's free to interested investors. Additionally, there is a page on the website with links to other CEF related investor information. joeeqcome.web.officeli...

    I hope you find this helpful.

    Joe Eqcome

    On May 08 08:47 AM Steve20423 wrote:

    > I'm curious about your due diligence when selecting these funds up
    > front.
    > I don't disagree with your conclusion but it appears you were speculating
    > on most of them to be something their not.
    > A simple look at their history of payments indicates they are inconsistent.
    > You can't really beat the index of your goal is to emulate it. I
    > think purchasing a CEF is a good alternative if they actively manage
    > to achieve their goal. But then you need to purchase at a deep discount
    > to the market. When so doing there is less downside(in theory). I
    > am sure you could have better choices if the goals and management
    > of the funds were more in line with your own goals. I would like
    > to know where to find more detailed analysis of CEF's If anyone can
    > offer some websites or newsletters I would be grateful.
    >
    May 8 01:15 PM | Likes Like |Link to Comment
  • Are ETFs and CEFs Good for Dividend Investing? [View article]
    Dividends4Life

    Thank you for you observations. I like many of the other respondents agree that dividend investing is more than picking stocks with high yields.

    However, your observation that there is greater dividend volatility in both CEF and ETFs than individual stocks seems to be a tautology, i.e., true by definition.

    RICs, such as CEFs and ETFs, are legally bound to distribute their income and capital gains on an annual basis. As a consequence, such entities, by their very nature, would have distributions that fluctuate with stock market and the CEF managers' decision to harvest their capital gains. Operating companies are under no such distribution requirement and the dividends as a percentage of net income has averaged 50% to 60%. This has provided operating companies much more flexibility maintaining dividends in times of economic stress.

    Much of your investment period (the late ‘70s) has been disappointing for shareholders and was reflected in the distribution of the CEFs. So, I'm not surprised with your results.

    Lastly, what you may want to focus on is the composition of the dividend. The key is to find CEFs that continue to pay consistent amounts from net investment income which is more of a recurring source of distribution.

    Joe Eqcome



    May 8 01:09 PM | 2 Likes Like |Link to Comment
  • CEF April Monthly Review: Real Estate Funds Rock [View article]
    Oooopps....

    Transposed Berkshire Hathaway ticker symbol in comment. Correct symbols should be: BRK.A & BRK.B

    Joe Eqcome

    On May 04 09:51 AM Joe Eqcome wrote:

    > Alan Young
    >
    > You're correct that BIF is not a real estate related CEF. What I've
    > try to do in these weekly reviews, in addition to provide an overview
    > on the CEF market segment, is to also provide an investable idea.
    >
    >
    > I thought that BIF might be some of interest as it has been brought
    > to our attention by Dan Plettner in this blog. It’s my intention
    > to do some more work on it and for other who might contribute provide
    > some feedback.
    >
    > Reason for my interest in BIF is: trading a significant time weighted
    > historical discount; has a large position in Berkshire (seekingalpha.com/symbo...);
    > has a significant slug of cash. Dan is raising investors’ consciousness
    > regarding actions that management might take do to close the discount
    > gap. For these reasons I think it may be worthy of further analysis.
    > (For the purpose of disclosure, I own a small holding in BIF and
    > may increase that position. While I’m happy to risk my own capital
    > on an incomplete idea, I don’t think it is fair for other people
    > to do so until the idea can meet the more rigorous criteria.)
    >
    > I thought it was worth of note but short of a recommendation as I'm
    > still accumulating info.
    >
    > Thanks for your comments.
    >
    > Joe Eqcome
    >
    May 4 11:16 AM | Likes Like |Link to Comment
  • CEF April Monthly Review: Real Estate Funds Rock [View article]
    FAMCO

    Your observations regarding the lack of an impartial advocate for retail CEF investor is both a true and sad commentary. Even when the brokerage firms had CEF coverage it was significantly biased; it was no more than a marketing tool for CEF IPO’s than independent research. Remember, the CEF industry is dominated by a few large fund sponsors who are likely to do “one off” funds. If you were an underwriter, you’d want to nurture the sponsor as they provided a nice steady stream of investment banking fees through a variety of CEFs develop by the sponsor.

    Additionally, the Closed End Fund Association (CEFA) is financially supported by the CEF sponsors. So, while CEFA provides decent information on the CEF market segment, as provided by Lipper, it can’t provide independent research. This is not a criticism of CEFA, just a fact.

    As it relates to BIF, if management is not maximizing the value of the CEF for the benefit of its shareholders’—as Dan suggests, then we should collectively apply pressure to have the policy or management changed. Whether Dan’s appeal will fall on deaf ears will be a function of the strength of his argument. It’s something which I’m going to spend some time looking into. (As a point of disclosure, I do own a small holding of BIF and I’ve had e-mail exchanges with Dan.)

    Joe Eqcome



    On May 03 10:33 PM User241885/(FAMCO) wrote:

    > Maverick's question about the closing gap on NAV discounts on buy/write
    > funds may have to do with the huge per-centage distributions as the
    > year end sell-offs pushed yields in to the high teens. There is little
    > or no brokerage sponsorship left so even the quality non-leveraged
    > names like Eaton Vance languished.
    >
    > The press did not pick up on this until the end of the winter and
    > with retail clamoring for yield, demand finally stirred up. It is
    > ironic as the data suggests that option selling of funds are the
    > ones that most steadily experience NAV erosion over time.
    >
    >
    > Dan Plettner's crusade with BIF reminds me of the horrendous situation
    > at the Seligman funds where the entire family funds during were in
    > the bottom percentiles of their categories consistently throughout
    > the great run of the eighties and nineties. In spite of the fact
    > of high fees, bad performance, continual bashing by the newsletter
    > writers and personal financial journalists, management still held
    > on through the decade.Does anyone know what happened to that family
    > of funds?
    >
    > It would not surprise me if the experience with BIF takes a similiarly
    > lengthy course. The actual history of "open-ending" closed end funds
    > has not been one characterized by overwhelming shareholder victory.
    >
    >
    > Having said that, I wish Dan the best of luck. The lesson of the
    > last few years is that shareholders deserve better.
    May 4 10:43 AM | 1 Like Like |Link to Comment
  • CEF April Monthly Review: Real Estate Funds Rock [View article]
    Maverick

    Your observations matches the numbers in my database.

    Opt/Arbitrage funds are classified in the “OtherFnds” category. There are 29 "OtherFnds" in my data base of which are 12 are classified as “Opt/Arbitrage”. Those 12 Opt/Arb funds are trading at a flat prem/discount (-0.6%) as of May 1st. Five of the 12 are trading at a premium (7.5%) while the balance at a discount. The greatest discount of the group is Nicholas-Applegate Intl Prem & Strategy Fund (NAI) at a discount of 15.8%. Don’t know much about this CEF. Do you have a view on NAI?

    Joe Eqcome

    On May 03 12:05 PM mavericks wrote:

    > Wondering what category buy/write (call option writing) equity CEF's
    > fall into? Many have gone to low single digit discounts if not absolute
    > premiums! Saw the same thing happen in Jan. and we all know how that
    > turned out.
    May 4 10:14 AM | Likes Like |Link to Comment
  • CEF April Monthly Review: Real Estate Funds Rock [View article]
    Alan Young

    You're correct that BIF is not a real estate related CEF. What I've try to do in these weekly reviews, in addition to provide an overview on the CEF market segment, is to also provide an investable idea.

    I thought that BIF might be some of interest as it has been brought to our attention by Dan Plettner in this blog. It’s my intention to do some more work on it and for other who might contribute provide some feedback.

    Reason for my interest in BIF is: trading a significant time weighted historical discount; has a large position in Berkshire (BKR); has a significant slug of cash. Dan is raising investors’ consciousness regarding actions that management might take do to close the discount gap. For these reasons I think it may be worthy of further analysis. (For the purpose of disclosure, I own a small holding in BIF and may increase that position. While I’m happy to risk my own capital on an incomplete idea, I don’t think it is fair for other people to do so until the idea can meet the more rigorous criteria.)

    I thought it was worth of note but short of a recommendation as I'm still accumulating info.

    Thanks for your comments.

    Joe Eqcome



    On May 03 03:05 PM Alan Young wrote:

    > Good article, although the last paragraph on BIF is non-sequitor
    > (since BIF no longer holds an appreciable amount of real estate).
    >
    >
    > Personally, I am much chagrined to have missed this run-up. I was
    > early to spot REITs as oversold and bought while they were still
    > falling; early to cash in when they started bouncing back; and now
    > maybe too late for what's left of the bounce. OTOH, a healthy does
    > of panic could still return to this sector--it certainly is riddled
    > with problems, and it's not a sure thing that TALF will cover them
    > all.
    May 4 09:51 AM | 2 Likes Like |Link to Comment
  • CEF April Monthly Review: Real Estate Funds Rock [View article]
    JSE17

    I agree that commercial real estate securities may be ahead of themselves given their significant recent run-up. No need to chase them here as there are still significant pending issues.

    Thanks for the encouragement.

    Joe Eqcome


    On May 03 09:44 AM jse17 wrote:

    > Your work is appreciated Joe!
    >
    > It may be at or near the time to sell the high flying REIT CEFs and
    > buy with 90% or so of the resulting capital, VNQ.
    May 4 09:28 AM | Likes Like |Link to Comment
  • CEF Fund Review: A Tale of Two Market Legs [View article]
    Old Man

    Thanks. MBB is a good find for the purpose of CEF US Mortgage fund type comparison. I'll add it to my list.

    Joe Eqcome

    On Apr 27 11:22 AM Joe Eqcome wrote:


    On Apr 27 08:51 AM oldman wrote:

    > MBB, an ETF for mortgage backed securites is positive.
    >
    > Performance As of 31-Mar-09 Get Performance for:
    >
    >
    >
    > MBB
    > PERFORMANCE OVERVIEW
    >
    > Year to Date Return (Mkt): 1.53%
    > 1-Year Total Return (Mkt): 7.07%
    > 3-Year Total Return (Mkt): N/A
    >
    >
    Apr 27 04:24 PM | Likes Like |Link to Comment
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